NEW YORK ( TheStreet) -- American Oriental Bioengineering (NYSE: AOB) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- AOB, with its decline in revenue, underperformed when compared the industry average of 9.1%. Since the same quarter one year prior, revenues slightly dropped by 3.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- AMERICAN ORIENTAL BIOENGR has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, AMERICAN ORIENTAL BIOENGR reported lower earnings of $0.22 versus $0.54 in the prior year. This year, the market expects an improvement in earnings ($0.24 versus $0.22).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 55.64%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 75.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Personal Products industry and the overall market, AMERICAN ORIENTAL BIOENGR's return on equity significantly trails that of both the industry average and the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Personal Products industry. The net income has significantly decreased by 70.4% when compared to the same quarter one year ago, falling from $3.12 million to $0.92 million.